MF Global Trustee Seeks Money From British Arm

Andrew Harrer/Bloomberg NewsJames Giddens, left, trustee of the liquidation of MF Global, and Terrence Duffy, executive chairman of CME Group, at a Senate panel in Washington.

The trustee liquidating MF Global’s trading operations said on Friday that his office was seeking the return of more than $600 million from the failed firm’s British arm, potentially setting up a cross-border fight over customer money.

The trustee, James W. Giddens, said in a statement that he had identified about $600 million to $700 million in American customer money held at MF Global U.K. That money, he said, was held for clients who traded on foreign exchanges.

But KPMG, the court-appointed administrator for the British subsidiary, disputes that conclusion. In a news release last week, KPMG officials said they had recovered £594 million, or $928 million, of client money and £201 million ( $314 million) of company money. The administrator plans to begin returning money to British customers “as soon as reasonably practicable.”

“I am disappointed in the U.K. administrators’ position,” Mr. Giddens said in a statement. “While we have made significant progress in identifying and distributing customer property held by U.S. depositories, the U.K. administrators’ position will significantly affect, in the near term, my ability to return a substantial amount to U.S. customers dealing in foreign futures.”

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But there are relatively few options for Mr. Giddens’s office to pursue. One of the most likely courses of action is to file a claim in the British court proceedings, where the probability of success is unlikely. Many clients of Lehman Brothers whose positions were held at the collapsedinvestment bank’s British arm tried for months to unfreeze their money, but were forced to liquidate their positions.

MF Global, the brokerage firm once runJon S. Corzine, the formerUnited Statessenator andNew Jerseygovernor, filed for bankruptcy on Oct. 31 after roughly $1 billion in customer money could not be found.

The money at the center of the dispute between Mr. Giddens and KPMG is not part of that missing cash, belonging instead to a separate pot of customer money.

But in light of the missing customer funds — a shortfall that Mr. Giddens has estimated at $1.2 billion — the dispute underscores the growing difficulty that Mr. Giddens faces. His team has distributed most of the funds held in United States depositary institutions, returning about 72 percent of customer money.